ITV Interview: Goetz Weber, Co-Founder and CEO, inDplay

Dr. Goetz Weber is co-founder and CEO of Silicon Valley-based start-up, inDplay. The company has developed an international online marketplace for film, TV and video rights, that is designed to meet the emerging needs of the multiplatform world. He recently spoke to [itvt]'s Tracy Swedlow about inDplay's service and the problems it is designed to solve, about the experience of using the service as a rights-holder or as a buyer, about inDplay's future plans for the service, and more.

[itvt]: Could you tell us a little about your background, Goetz?

Weber: I'm an ex-scientist who went into the software business. I'm a theoretical physicist by training.

[itvt]: What kind of theoretical physicist?

Weber: High-energy particle physics. Please don't ask me about that: it brings back horrible nightmares of endless mathematical equations! But seriously, theoretical physics taught me a lot about complex systems and about how systems work in general. Both big systems and small systems. Anyway, I left theoretical physics and went into the software business and started working for a company called SAP, which is one of the big enterprise software companies.

I worked in a variety of roles, there--from development to product management to sales. Then, when I went back to school for my MBA, a colleague and I worked on a project that was one of the very early pioneers of enterprise services automation--or Web services, as it's now known. SAP later acquired the IP, and we grew it into a business unit within SAP that now has somewhere close to 250 people and provides a sizeable revenue stream for SAP.

A few years later, I began studying acting because of my deep interest in film. One day I just decided that I wanted to be an actor. So I took a bit of a sabbatical from SAP to study method acting. I also had the opportunity to work with some relatively well-known actors here in the Bay Area, who had been trained in method acting and had worked with   famous directors. That experience not only exposed me to a disciplined form of acting, it also exposed me to the media business at the grassroots level--from the production to the distribution of a film. But the most important thing that the experience taught me was just how hard the business is--how difficult it is to make a movie and to get it in front of the right audiences. Over those few years, I realized that film distribution isn't just about the actual distribution of the content. It's also about creating the business relationships between licensors and licensees, or buyers and sellers. I looked at how films are made, and how films are distributed and marketed, and I realized that there was an opportunity here to take the power of the Internet--which is all about connectivity and relationships--and use it to facilitate distribution and create business relationships.

[itvt]: Could you explain what inDplay does?

Weber: The media business centers around the distribution of intellectual property, right? Any video, program or piece of music is a piece of intellectual property. And this intellectual property has a lifecycle, over the course of which it gets licensed to many business partners. That actual process of licensing--of connecting distributor X to video Y--is a business process pain. Because, at the root of it, the deal you're doing is a licensing deal, which is a complex transaction.

Now, let's look at eBay as an example. The way I see eBay is that it built an economy around a simple transaction. That transaction is the sale. If you list your watch on eBay for sale and I happen to be looking for a watch like the one you're selling, even though you and I have never met before in person, we can do a transaction called "the sale" in your case and "the purchase" in my case. So eBay facilitates both the item discovery and the actual transaction. They've taken this very simple transaction and they've created an infrastructure around it: what you might call a transaction engine. On top of that transaction engine, they've built an economy, with all the elements of discovery, transaction and trust.

Now there are all kinds of wonderful items for sale on eBay. You can buy a used car on eBay. You have stores on eBay. You have multiple different product categories. But the basic assumption is that people execute standardized business transactions with one another. And these business transactions are always a sale or a purchase. They have commoditized the process, but not the items.

Now, if we approach the movie business in the same way, and ask, "What is the underlying transaction that is done in the movie business?" Well, it's the license, correct? Movies are licensed. Of course, there are additional layers of complexity if you compare the typical license deal to the typical auction or outright purchase on eBay. One such additional layer of complexity is that a given piece of intellectual property--be it a video, a TV program or whatever--can be licensed onto many platforms. I can license it for theatrical, for VOD, broadcast TV, and so on. So it's somewhat more complicated than a transaction on eBay, because the same piece of IP--or the same video--can be licensed for multiple different kinds of platforms over its lifecycle.

Nevertheless, what we are doing is providing a service similar to eBay's. There are two kinds of players who use our service: licensors (we usually refer to them as "rights-holders" or "sellers") and professional buyers. As a rights-holder, you declare ownership of your property--of your video--and you register various data on that video: the data would typically be similar to the kind of metadata you find on IMDb. Just as on eBay, you would represent yourself as the owner of whatever it is you are selling, and provide information for potential buyers.

So, let's say you're a production studio and you've just produced a movie or you're the agent representing that movie. You've sold the European cable TV distribution rights for a year to a cable buyer for a few thousand dollars. But you still retain a host of other rights: you retain the VOD rights, the theatrical rights, rights for other territories, etc. What we want to do is to help you monetize all of those rights.

[itvt]: Could you talk us through the experience of using your service?

Weber: Absolutely. We require the rights-holder to submit two types of data. First, there's contextual data about the movie--think IMDb. So, the movie's titles, its actors--all the gritty details on the actual product itself. And then there's the data about the rights you currently hold and the rights you currently want to sell. So we take the rights-holder through a streamlined process whereby they list these rights. And, in the movie business, the rights are in three dimensions, so to speak: the first dimension is territory; the second is platform; and the third is timeframe. So, unlike a transaction on eBay, where I would buy outright the watch you were selling and would own it indefinitely, in a licensing transaction, I would purchase the rights to offer your movie in a particular region (say Europe), on a particular platform (say VOD), for a particular amount of time (say two years).

So what our service does is it creates an economy. It lets people participate in the economy of licensing IP--specifically, videos and television programming. In order to participate in that economy, you have to either buy or sell--be a licensor or a licensee. If you're a licensor, the minimum requirements we have are that you declare what you own. If you're a buyer, we make it easy for you to discover properties that are relevant to you as a distributor or as an exhibitor. You need a process to get to the sellers--and, until now, that has been a significant pain point. When I looked at the independent film world, I  realized that discovering content to license is a difficult task because it is such a fragmented and geographically dispersed market. And that actually applies as much to the TV world as to the indie film world and video in general. So what we do is we provide an online marketplace that makes it simple and easy for buyers to get access to professional content based on their acquisition criteria.

Now, one of the reasons a service such as ours is needed is that the emergence of new platforms is making the process of licensing videos a lot more complex than it ever was before. The world of theatrical distribution is a small and very efficient world, that's been around for 80 years or so. It's efficient in that all the parties know one another. It's a small community. But, thanks to the emergence of all these new platforms, there are now multiple new players that are entering the distribution space and that are 1) looking for content, and 2) looking to find that content without spending huge amounts of money at film festivals, etc.

[itvt]: Now, presumably not just anyone can sign up as a buyer on your service…

Weber: No. We check whether you're a professional user--i.e. whether you come from the world of distribution and exhibition. We don't sign up consumers on the buyers' side. We sign up entities that are professional video buyers. We're focused on creating new avenues for the monetization of professionally produced films and TV programming. The market for that professionally produced content is companies from the theatrical world, the traditional TV world, the VOD world, the IPTV world and so forth. In other words, to be a buyer on our service, you will be pre-screened or pre-qualified to ensure that you are a professional buying entity, qualified to play in this business.

[itvt]: Could you tell us more about the experience of using your service as a buyer?

Weber: Let's first look at the current process through which buyers acquire content. In order to acquire content--newly produced content, that is--you go to the film markets and the film festivals. You take a look at the new movies that have debuted at those markets. You negotiate, and maybe you'll find a seller and maybe you won't. But the thing is, while those kinds of markets are efficient markets for studio product, they're complex and inefficient for non-studio product.

What we offer is a searchable repository not just of metadata--of the kind of stuff you can find on IMDb--but also of the specific kinds of rights that you're looking for (obviously a TV station, for example, is unlikely to want to buy DVD rights). So what we're offering buyers is a direct path to get to the rights-holder (or his/her agent), and a mechanism for them to quickly acquire the content they're looking for. That rights-holder, of course, could be a variety of entities, such as an indie filmmaker, a production studio, a video library or the agent who is representing that title. The inDplay marketplace offers an incremental source of available content for buyers across all platforms and we streamline the discovery and acquisition process by providing a robust and easy-to-use contract builder for establishing and managing all of these license agreements.

[itvt]: I notice that on your site, you offer photos from the films and programs you carry, but that you don't offer extensive clips of the films and programs themselves…

Weber: Not yet. But we will be offering streaming and other ancillary services to our users to facilitate the acquisition process. While we currently stream trailers, we also plan to offer buyers increasing depths of preview, including screeners and DRM-enabled viewing rights. After all, our goal is to facilitate the distribution of licenses, so that rights-holders can make more money and buyers can quickly find exactly the kind of content they are looking for when they want it.

[itvt]: As of today, there are no community features as such on your site, are there? You don't allow people to, for example, comment on films and programs that are available for sale, correct?

Weber: That may well change. In my opinion, the three sets of data that are relevant to a buyer before he or she picks up a video or TV program are 1) the IMDb-type data, 2) the rights data, which allow them to determine whether a particular piece of content is available for their particular platform, as well as how much it will cost, and 3) community-related data--so data that answers questions such as "What audiences does this TV program appeal to?" or "What are critics saying about this film?" So we certainly believe that such community-related data facilitates the buying decision. What we plan to do is aggregate this information on ratings and reviews, create community features that enable users to contribute to the richness of the data for each film or video property, and present all of this to the buyer to facilitate their buying decision.

[itvt]: When are you planning to launch these features?

Weber: We are planning to launch them in the next couple of months. Until now, though, we've spent most of our time and money building the rights-management and licensing transaction system. That, of course, is the underpinning of the licensing economy that we're building with our service.

[itvt]: Now, when the buyer is ready to buy the rights to a piece of content, what happens? You mentioned earlier that your service offers a "contract builder."

Weber: Think about eBay for a second: when you click a "Buy Now" button on eBay, you're automatically agreeing to certain financial terms and certain delivery terms, correct? The buyer and the seller are agreeing to terms that are listed on eBay's Web site. Likewise, our infrastructure allows the buyer, by selecting a series of conditions, to enter into a contract that says, for example, "I'm going to license your video for my VOD channel in Europe for 12 months," and that covers additional terms such as delivery and escrow of payments, etc. The contractual framework is all relatively well-defined. We've created a standardized framework that rights-holders use to apply their own required licensing terms. As I mentioned, it's pretty much like eBay, where you have a set framework that allows you to make economic arrangements.

So, to summarize, inDplay provides a framework which, first of all, allows buyers to discover sellers and to see what rights are available for a piece of content, and which, secondly, allows you the buyer to engage in an online negotiation for those rights, and which, thirdly, allows both buyer and seller to come to an a licensing agreement for those rights.

[itvt]: Presumably one of the strengths of your service is that it allows rights-holders to keep track of their rights…

Weber: Absolutely. A lot of rights-holders today, if you were to ask them how much money they're getting over the next 12 months from the rights they've sold, wouldn't be able to tell you. Because, after all, you don't get bank statements for your rights. However, one of the things that inDplay provides to buyers and sellers is exactly that: a virtual bank statement of your rights. So sellers can go to the site and see, for example, that they sold TV rights to their movie to Fox for four years back in 2003 and that they're earning $12,000 a year, that they sold their DVD rights to Player 5 for $30,000, and so forth. We provide sellers with this overview of the portfolio of rights that they own, and this helps them gain an understanding of their asset value. Today, a lot of rights-holders honestly don't know what's going on with their rights, and probably don't track the payments that have accrued over the lifecycle of their intellectual property. Buyers, meanwhile, can use our service to track payments due, deliverables received and portfolio performance across all of their licensed assets.

[itvt]: Can you give us an overview of some of the rights-holders and properties that are represented on your site?

Weber: Hundreds of indie filmmakers are using our site, and we've registered several prominent libraries, including quite a few high-end properties. You may have heard of Lars von Trier. We have several of his movies on inDplay, including "Dogville," "Breaking the Waves," "Dancer in the Dark" and others. If you search for "Dogville," you will find his film and, if you're a buyer--i.e. a user of what we call our inDplay PRO service--you will also be able to see what rights are available for sale. You see, doing deals for entertainment properties is a hard and expensive business process, and filmmakers want to create films. However, they need buyers in order to sustain production. We allow them to get in contact with buyers on a worldwide scale. Selling a movie to, say, a Korean theatrical distributor or to five different Japanese VOD players--those are hard business transactions to do, and our service makes it relatively easy to conduct these transactions on a worldwide basis.

[itvt]: How does your service generate revenues?

Weber: On the sell side. If we create economic value for the seller, we'll charge them for it.

[itvt]: In other words, you take a percentage of any sales, correct?

Weber: Yes. When a seller uses our service, they get a bank statement, so to speak, that outlines their various rights and all the payments that are associated with their rights portfolio. The buyer gets a very powerful rights-management tool, which would typically cost hundreds of thousands of dollars to build or to implement from some of the other players in the market. And, if there is transaction flow through the system--in other words, if there is value generation--we'll take a percentage.

[itvt]: And that percentage is the same for any kind of property?

Weber: It's a consistent amount that's typical of the industry. I'll be frank: we're experimenting with our pricing to learn what the market will support and to determine what our pricing model will ultimately be. That is why the initial transactions that we have closed on inDplay serve as important models. We have already sold a variety videos on inDplay and our sellers help us understand what the total value proposition is that we provide and what the market price for our services should be, especially across platforms and territories. But overall, our philosophy is that if we create a sale for a rights-holder, we should get a commission for it. In some ways, think of us as an online channel for sales.

[itvt]: Are you at any risk of being held responsible if somehow a contract generated by your service is negated? How do you reduce liability?

Weber: Liability is a big potential risk, to be honest. We've spent a lot of time and effort in understanding liability and mitigating this risk. Since we are not a rights-holder, we do not actually obtain any rights over the properties listed on our marketplace. We just facilitate business relationships. That's what our indemnification agreements say: that to the best of your ability, you will execute and fulfill the arrangements you make. This is a legally binding contract. If you do not fulfill it, then there will be a dispute resolution process, perhaps including an arbitration mechanism of some kind. There is a whole business in this industry that focuses on arbitration and payment settlements, in case there are disputes, so we are fully prepared to partner, refer or otherwise collaborate with these agencies as necessary.

[itvt]: How are the big studios responding to your service? Are you on their radar?

Weber: The way I see it is that there are two very different worlds of content--and this is something that applies as much to TV as to video properties. In the case of freshly minted properties--blockbuster hits that have just been released, such as "Brokeback Mountain," for example--its rights-holder is going to take it to a venue like the Berlin Film Market, and sell its theatrical rights for several million dollars. They are unlikely to use a service like inDplay to distribute this film. That's a relationship sale--pretty much like sales in a Ferrari dealership. We don't see ourselves as playing in that space.

[itvt]: But a big studio might use your service to sell rights to library titles, correct?

Weber: Yes. MGM, for example, has a very big library. Now, while they specifically haven't yet signed up for our service, they are a great example of a studio that has a lot of value locked up in their library, and an additional, low-effort channel through which to monetize that library would be welcome. The cable networks also have huge inventories of programming that a service like ours would allow them to monetize. But today the sellers that we tend to appeal to are privately held libraries that have under-utilized video and TV assets they want to monetize--and of course, the many filmmakers who don't have the marketing dollars or the contacts to be able go to every film market to connect with every possible distributor.

[itvt]: Have you explored the possibility of promoting your service to rights-holders for non-entertainment content?

Weber: Well, I think that the market for educational and instructional videos could be tremendous. One really great market to be in would be for educational videos for companies that need to ensure that they're in compliance with the Sarbanes-Oxley Act. However, instructional corporate video is not a market that we've seriously explored yet. We've explored the educational documentary market in detail. However, licensing for the corporate-educational market is a somewhat different market, in which we don't have experience today.

[itvt]: Who would be your typical buyer?

Weber: Think of the local TV station, or the smaller cable network with local and independent TV channels, or IPTV people who are looking for content. The pain points for these kinds of entities are 1) that they need to find something of quality, 2) that they need to find the appropriate source for that content, and 3) that they need to do a deal quickly and not spend thousands of dollars going through endless procedures and negotiation cycles. Those problems are the ones we are trying to solve.

[itvt]: Do you have any plans to allow rights-holders to sell properties that have yet to be completed--i.e. to use your service, in effect, as a fund-raising mechanism?

Weber: We're thinking about doing that. We're considering extending our marketplace to include properties that have not been completed--connecting potential rights-holders with financing opportunities.

Right now, inDplay helps sellers find buyers for their properties, by connecting them online with those buyers. In the future, what I want to do is to create a community, by bringing together filmmakers, actors and financiers into the inDplay marketplace. I want to help them connect on inDplay, so that this marketplace enables them to make movies. I believe there's a tremendous opportunity to build an ecosystem that supports all the different kinds of people involved in the film and TV economy. Earlier in our conversation, I described what we are doing as not too different from what eBay does. But there's potentially a huge difference between us and eBay: on eBay, you can only sell a finished product--eBay doesn't get involved in the manufacturing or assembly of the product. But we could actually do that. Like Craigslist, we could help people find each other and create a business agreement for collaboration, making it possible for directors, actors, screenwriters, musicians and whoever else to connect online and make a video or TV program. And, obviously, our service could also help them finance and sell the property they create. Another thing we may be interested in eventually doing is connecting advertisers to film and TV properties, even while those properties are still in production.

URL: inDplay

Originally Published: October 12, 2006 in [itvt] Issue 6.98

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